Question

Colton Enterprises experienced the following events for Year 1, the first year of operation:

1. Acquired $54,000 cash from the issue of common stock.
2. Paid $13,900 cash in advance for rent. The payment was for the period April 1, Year 1, to March 31, Year 2.
3. Performed services for customers on account for $110,000.
4. Incurred operating expenses on account of $44,500.
5. Collected $84,000 cash from accounts receivable.
6. Paid $40,000 cash for salary expense.
7. Paid $35,600 cash as a partial payment on accounts payable.

Adjusting Entries

8. Made the adjusting entry for the expired rent. (See Event 2.)
9. Recorded $6,200 of accrued salaries at the end of Year 1.

Events for Year 2

1. Paid $6,200 cash for the salaries accrued at the end of the prior accounting period.
2. Performed services for cash of $59,000.
3. Purchased $4,700 of supplies on account.
4. Paid $16,200 cash in advance for rent. The payment was for one year beginning April 1, Year 2.
5. Performed services for customers on account for $126,000.
6. Incurred operating expenses on account of $60,500.
7. Collected $108,000 cash from accounts receivable.
8. Paid $58,000 cash as a partial payment on accounts payable.
9. Paid $33,400 cash for salary expense.
10. Paid a $10,000 cash dividend to stockholders.

Adjusting Entries

11. Made the adjusting entry for the expired rent. (Hint: Part of the rent was paid in Year 1.)
12. Recorded supplies expense. A physical count showed that $400 of supplies were still on hand.

e. Record the entries to close the Year 1 temporary accounts to Retained Earnings in the general journal and post to the T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal Entry:

1.) Record entry to close service revenue

2.) Record entry to close expenses

then,

cash

accounts receivable

prepaid rent

accounts payable

salaries payable

common stock

retained earnings

service revenue

operating expenses

rent expense

salaries expense

Answer 1

Journal Account Titles and Explanation Debit ($) Credit ($) No. Date Year 1 Adjusting entries: Rent expense (13900*9/12) 10,425 Prepaid rent 10,425 (To record the rent expense incurred form April 1 to Dec 31 of Year 1) Salaries expense 6,200 Salaries payable (To record the accrued salaries) 6,200 Closing entries: 1 Service Revenue 110,000 Retained Earnings 110,000 (To record the closing of income accounts to retained earnings |account) 101,125 Retained Earnings 2) Rent Expense (13900*9/12) 10,425 44,500 Operating expense Salary expense (40000+6200) 46,200 (To record the closing of expense accounts to retained earnings |account)

Dr Retained Earnings CR Rent Expense Operating |expense Salary expense 10,425 Beginning Bal. 44,500 Service Revenue 110,000 46,200 Ending Bal. 8,875 $ 110,000 110,000